Australia’s positive run of economic growth can largely be attributed to the country’s leverage to China, however, it is important to also acknowledge the flexibility in Australia’s economy.
Fidelity Australian equities portfolio manager Kate Howitt said the flexibility had helped the market understand that when the mining sector “plays out”, other parts of the economy would “step up”.
“We’ve had a wonderful run in economic growth and it’s due to our leverage to China in a large part, but let’s not forget that underpinning that has been flexibility in our economy, and that should give us the understanding that when the mining sector plays out that other parts of the economy will step up,” Howitt said.
“That has been the history with the Reserve Bank monetary policy helping that transition.”
Speaking at an adviser briefing in Sydney yesterday, Howitt said Australia’s leverage to emerging markets, through iron ore and coal exports, should also pick up.
“The market is cheap and each of us has to look and try to come to a view as to why they are cheap, but the good thing is that since they are cheap, risk reward is in our favour,” she said.
“It’s hard to come up with a scenario of significant downside from here. The range of scenarios points more to markets at least staying flat from here.”
